China’s rise: Lessons for the West

Raphie Kaplinsky of Britain’s Open University was one of the founders of its Asian drivers programme which began as far back as February 2005 following a Rockefeller programme on global production networks. He recalls that its researchers found that African work on China’s engagement was largely underreported in the West, apart from the work of individual scholars working in the field such as Chris Alden and Deborah Brautigam, as well as the work of some in the NGO sector, including the work being done at Fahamu.

When he and his colleagues took the case for a wider programme to the UK’s Department for International Development (DFID) the response was that the idea was ‘interesting’ but did not fit into DFID’s structures built around country teams.

Official circles only found a belated response after Goldman Sachs’ work on the BRICs (Brazil, Russia, India and China) had popularised the concept of ‘Rising Powers’. Britain’s Economic and Social Research Council, which channels public funding into academic research, responded by convening a workshop in May 2007 calling for a series of networks on ‘Rising Powers’, funded with a £1.5m pot - equal to six months of the UK’s total research grant budget.

‘China as the new “shaper” of global development’ is one of the networks funded under the programme. Its core objectives are to explore how China's own development trajectory shapes its engagement with and impacts on different regions; deepen our understanding of how and why China acts as an agent of global development; and assess the implications of China for low income countries and for the international development community more broadly.

As network co-ordinator, the Open University’s Giles Mohan explains that the network confronts a situation in the academic and research community where ‘there are Africanists who know little about China, and Sinologists working on foreign policy who know little about the local impact’. So a dialogue is needed between these different area specialists as well as across disciplinary boundaries, between economists, and social and political scientists and others.

The network’s first meeting was held in Beijing in July 2010 in collaboration with Tsinghua University. It aimed at understanding the domestic processes behind China’s development policy thinking, and the ways in which Chinese experience shapes the Chinese approach. A key message, says Mohan, was the need to disaggregate foreign policy actors, beyond the usual top-level analysis concentrating on central bodies such as Eximbank and MofCom, to take in wider groups and multiple discourses within China.

The second workshop, just held in London, looked at the actors, institutions, motives and modes of interaction through which China and low - income countries engage, and the problems of researching and analysing their impacts and China’s impact on globalisation and international development.

As Mohan points out, much current analysis concentrates on the level of elite interaction and prestige projects. The project aims to concentrate at a more low-key level on topics such as agricultural innovation, the role of Chinese SMEs, and other ‘below the radar’ issues.

One aspect of conventional wisdom to be challenged by workshop contributors was the view of China’s outward investment as state-driven. As Jing Gu of the Institute of Development Studies at Sussex University pointed out, the majority of Chinese firms investing in Africa are SMEs. They are characterised by high flexibility, a strong entrepreneurial spirit and work ethic, and are highly concentrated by provincial origin, with Zhejiang at the head of the list.

They are increasingly concentrated in manufacturing, and are intensively competitive with each other, with few joint ventures. The main motives for their African involvement, apart from access to local markets, she finds, is intense domestic competition, the need to export excess capacity, and the possibility of access to new foreign markets such as the EU through trade agreements.

Two papers from Chinese contributors threw light on the relevance of Chinese experience to Africa’s development. Wang Xinsong from Beijing Normal University reported on a survey conducted by central government and the Chinese Academy of Social Sciences into the effects of the political reforms in local government introduced after the dissolution of the commune system. In the villages this included elections to village councils and elements of public oversight such as village assemblies and financial audit.

The research, surveying 3,500 villages and 380 cadres, confirmed that good governance as measured both by objective measurement and by public reaction, was greater where the democratic reforms had been more consistently implemented. Good governance was also correlated with superior economic performance - a conclusion with interesting policy implications both in China and in Africa.

Cheng Enjiang from China’s International Poverty Reduction Centre outlined China’s economic development strategy. The key lessons he pointed to included the key role of agriculture in the first stage of development for growth and poverty reduction, and the centrality of a protected domestic market for farm products. The development of manufacturing was essential for jobs and growth, with the role of government crucial in enabling the attraction of foreign investment through provision of infrastructure and an effective supply chain, together with the ability to ensure independent macro-economic and trade policies and a balanced budget.

For the future there was a need to upgrade Chinese manufacturing and develop the service sector and domestic consumption to combat the danger of an asset bubble caused by the massive trade surplus. Relocation of low-cost coastal manufacturing to other countries and to China’s poorer western interior was part of this. Purchase of overseas assets was another way of reducing the surplus and diversifying out of US Treasuries.

But how far would any such relocation of Chinese investment affect the economic development prospects of sub-Saharan Africa? As other contributors pointed out, some 50 per cent of Chinese exports are simply assembled locally for Western purchasers; of a $200 iPod only US$4 represents value added in China. Here, as Raphie Kaplinsky and Mike Morris from the University of Cape Town both pointed out, global value chain analysis allows us to measure ‘who is getting what’ along the global chains.

Morris took the example of the textile industry in Lesotho to show how Chinese-controlled value chain can lock local producers into bulk commodity low value-added items with no incentive to innovate or develop local management and skills. Meanwhile key functions such as branding, R&D and marketing are all concentrated in the global North, together with other rents - though there were indications that alternative value chains controlled by South African firms and not aimed at the US market had a better record in training local managers and supervisors and in process upgrading generally.

There was equally detailed and specific discussion of other topics ranging from the impact of Chinese demand on cassava value chains in Thailand to fieldwork with Chinese businesses in Ghana and Angola.

The papers should all be accessible within the next few weeks at the project’s website at http://www.ids.ac.uk/go/idspublication/china-s-rise--implications-for-low-income-countries

The third workshop will be held in Brighton at the Institute of Development Studies on November 25 and 26. It will apply the analytical framework of the network to particular research areas on energy and the environment to refine the methodology and synthesize the lessons from the three workshops. Research has been undertaken on China's rise as a development actor in the Mekong Region and Africa in relation to energy developments, where energy is a cross-cutting theme involving environmental, economic, social and political issues.

Findings from the first workshop have been summarised in a briefing ‘China’s Rise - Implications for Low Income Countries’ published by IDS in conjunction with the ESRC, DFID, Oxfam and the OU which can be downloaded at http://www.ids.ac.uk/go/idspublication/china-s-rise--implications-for-low-income-countries

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* Stephen Marks is co-ordinator of the Fahamu China in Africa project. A researcher and writer specialising in economic development and environmental issues as they impact on civil society, he has worked as a consultant for a number of international projects.
* Please send comments to [email protected] or comment online at http://www.pambazuka.org/